BQ: RCom Vs Ericsson: Round Two Begins At The Supreme Court

28 March 2019: The second act in theReliance Communications Ltd.versus Ericsson saga started in the Supreme Court today.

The Anil Ambani-group company sought to withdraw its objection to the insolvency application filed by Ericsson. The Swedish telecom equipment maker, which recovered dues worth over Rs 500 crore from RCom, opposed the withdrawal of objections and now wants the insolvency proceedings to end.

The matter came up before a bench of Justice Rohinton Nariman and Justice Vineet Saran. It directed Ericsson to respond as to why it doesn’t want the insolvency proceedings, initiated as a result of its application, to continue.

In 2017, Ericsson had approached the NCLT with a petition to initiate insolvency proceedings against RCom for failing to clear dues worth Rs 1,500 crore. It was admitted by the Mumbai bench of the National Company Law Tribunal on May 15 last year. This is at the centre of the arguments before the apex court now.

The end of the insolvency process is critical for Ericsson, failing which it may be forced to return Rs 550 crore that it has secured. That’s because after the NCLT admitted Ericsson’s insolvency application, RCom had approached the NCLAT against it.

In May last year, the NCLAT granted a conditional stay on the insolvency process. This was granted since RCom agreed to pay Rs 550 crore to Ericsson as a settlement amount. In the same order, the NCLAT noted:

The payment of Rs 550 crore in favour of the ‘Operational Creditor’ [Ericsson] shall be subject to the decision of these appeals. If the appeals are dismissed, the ‘Operational Creditor’ will pay back the amount to the ‘Corporate Debtors’ [RCom].

This means if appeals to the NCLT order—which had paved the way for the insolvency process—are dismissed, the proceedings under the bankruptcy law will start and Ericsson would need to pay back Rs 550 crore to RCom.

This could be why Ericsson is now arguing to withdraw its insolvency application. The apex court has given the company two weeks to file its reply.